Bentz Metal Products v. Faehnrich, Larry

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-1320

In re
Bentz Metal Products Company, Inc.,

Debtor-Appellee,

Appeal of: Larry Faehnrich, et al.,

Plaintiffs-Appellants,

v.

Bentz Metal Products Company, Inc.
and NBD Bank, N.A.,

Defendants-Appellees.

Appeal from the United States District Court
for the Northern District of Indiana, Fort Wayne Division.
No. 99-C-449--William C. Lee, Chief Judge.

Argued September 7, 2000--Decided November 6, 2000

Before Bauer, Posner, and Evans, Circuit Judges.

Bauer, Circuit Judge. Plaintiffs-Appellants
("employees"), former employees of debtor Bentz
Metal Products Company, Inc. ("Bentz"), appeal
from the order of the United States District
Court for the Northern District of Indiana, Fort
Wayne Division, affirming the judgment of the
Bankruptcy Court of the Northern District of
Indiana, Fort Wayne Division, which held that the
employees’ mechanic’s liens, filed under Indiana
Code sec. 32-8-3-1 et seq., for unpaid vacation
pay were invalid because of the preemptive effect
of sec. 301 of the Labor Management Relations Act
("LMRA") of 1947, 29 U.S.C. sec. 185(a). For the
foregoing reasons, we affirm the judgment of the
district court.

BACKGROUND
The employees were members of the International
Union, United Automobile, Aerospace and
Agricultural Implement Workers of America, Local
2298. The terms and conditions of their
employment with Bentz were governed by a
collective bargaining agreement ("CBA"),
effective between March 11, 1994 and November 17,
1996.

On January 17, 1996, an involuntary bankruptcy
petition under 11 U.S.C. sec. 303 was filed
against Bentz. The case was converted to a
Chapter 11 proceeding, and then later reconverted
to a Chapter 7 proceeding. Upon the cessation of
manufacturing by Bentz, the employees timely
filed mechanic’s liens seeking unpaid vacation
pay owing to them under the CBA. All parties
stipulated that the amount of vacation pay owed
to the employees, according to a schedule set
forth in the CBA, totals $12,700.38. The
employees then filed an Adversary Proceeding in
Bankruptcy Court to determine the validity,
extent, and priority of the liens, naming Bentz
and NBD Bank, Bentz’s secured lender, as
defendants. Relying on In re Bluffton Casting
Corp., 186 F.3d 857 (7th Cir. 1999), the
Bankruptcy Court held that sec. 301 of the LMRA
preempted the employees’ mechanic’s liens because
"these liens are for monies that stem from the
[CBA]." Summ. J. Hr’g Tr., Sept. 27, 1999, at 2.
The district court affirmed, and we affirm as
well.

DISCUSSION

Since the facts are not in dispute, our review
of the lower court’s conclusions of law is de
novo. See In re Yonikus, 974 F.2d 901, 903-04
(7th Cir. 1992). This case, like many before it,
arises because there are insufficient assets to
satisfy all creditors. The issue framed by the
parties is whether sec. 301 of the LMRA preempts
the employees’ Indiana mechanic’s liens for
vacation pay entitlements owed under the CBA. The
consequences of preemption in this case, simply
stated, are: if the employees’ liens are valid,
then they are superior to NBD Bank’s security
interests; however, if the liens are preempted,
then NBD Bank will apply the $12,700.38 to their
claims against Bentz. Let us follow the trail of
the various laws on the subject and see if we can
resolve the interesting question (always an
interesting question!) of who gets the money.

Congress exercised its power under the Supremacy
Clause of the United States Constitution to enact
sec. 301 of the LMRA, which reads:

Suits for violation of contracts between an
employer and a labor organization representing
employees in an industry affecting commerce as
defined in this chapter, or between any such
labor organizations, may be brought in any
district court of the United States having
jurisdiction of the parties, without respect to
the amount in controversy or without regard to
the citizenship of the parties.

29 U.S.C. sec. 185(a). It is axiomatic that this
jurisdictional provision authorizes federal
courts to develop federal common law for the
enforcement of CBAs. See United Steelworkers v.
Rawson, 495 U.S. 362, 368 (1990); Lingle v. Norge
Div. of Magic Chef, Inc., 486 U.S. 399, 403
(1988); Allis-Chalmers Corp. v. Lueck, 471 U.S.
202, 209 (1985); Complete Auto Transit, Inc. v.
Reis, 451 U.S. 401, 405 (1981); Teamsters v.
Lucas Flour Co., 369 U.S. 95, 103-04 (1962);
Textile Workers Union of America v. Lincoln
Mills, 353 U.S. 448, 449-56 (1957); In re Amoco
Petroleum Additives Co., 964 F.2d 706, 709 (7th
Cir. 1992). This promotes uniformity because "any
attempt to interpret, enforce, or question a [CBA
is] necessarily based on national law . . . ."
Amoco, 964 F.2d at 709. A body of uniform law is
particularly important in enforcing arbitration
provisions, a staple of most CBAs. See Lingle,
486 U.S. at 410-11. The Supreme Court, however,
has made clear that state law claims are not
automatically preempted in every case involving
a CBA. Claims independent of or tangentially
involving a CBA are not preempted. See Livadas v.
Bradshaw, 512 U.S. 107, 123 (1994); Lueck, 471
U.S. at 211.

Within this rubric, we extract two instances in
which preemption has been held to occur. "Various
circuits, including this one, have recognized
that a claim may be preempted under the LMRA
either because it depends on interpretation of a
CBA or because the claim is founded on the CBA."
Bluffton, 186 F.3d at 862 (citations omitted).
So, preemption occurs, first, if the state claim
is "founded directly on rights created by [the
CBA]." Lingle, 486 U.S. at 410 n.10 (citing
Caterpillar Inc. v. Williams, 482 U.S. at 394-
95). And, second, preemption applies if the right
is created by state law, rather than the CBA, and
application of the law is "substantially
dependent on analysis" of the CBA. Id. When
liability is created by state law, independent of
the CBA, a court must determine whether the CBA
needs to be interpreted or if a quick look is
enough. See Loewen Group Int’l, Inc. v.
Haberichter, 65 F.3d 1417, 1421 (7th Cir. 1995).

The employees concede that our recent opinion
in Bluffton is controlling. Bluffton held, in
part, that plaintiffs’ Indiana mechanic’s liens
were preempted by sec. 301 of the LMRA. The
employees, however, respectfully ask us to
reexamine Bluffton. Given their request, we
reiterate the importance of stare decisis.

The most complex relationship is between a court
and its own previous decisions. A court must give
considerable weight to those decisions unless and
until they have been overruled or undermined by
the decisions of a higher court, or other
supervening developments, such as a statutory
overruling. But it is not absolutely bound by
them, and must give fair consideration to any
substantial argument that a litigant makes for
overruling a previous decision.

Colby v. J.C. Penney Co., Inc., 811 F.2d 1119,
1123 (7th Cir. 1987). We require compelling
reasons to overturn Circuit precedent. See Mid-
America Tablewares, Inc. v. Mogi Trading Co., 100
F.3d 1353, 1364 (7th Cir. 1996). There has been
no higher court or statutory overruling of
Bluffton, and ours is the sole Circuit to address
whether a state’s mechanic’s lien law is
preempted by sec. 301. Further, no other courts
have discussed Bluffton. With this in mind, we
turn to the employees’ arguments.

The employees argue that Bluffton failed to
adequately address our prior decisions in Atchley
v. Heritage Cable Vision Assocs., 101 F.3d 495
(7th Cir. 1996) and National Metalcrafters v.
McNeil, 784 F.2d 817 (7th Cir. 1986). They read
these cases as holding that state claims are
preempted only if interpretation of a CBA is
necessary. Therefore, they believe if we
reexamine these decisions, we will find that the
law holds that federal preemption ought not apply
if the claim is merely founded on the CBA, and
correlatively, that preemption ought apply only
if the state claim requires interpretation of the
CBA. Under this view of the law, the employees
contend that while their rights to the vacation
pay are founded on the CBA, the amount owed is
undisputed, and thus, no interpretation of the
CBA is required. Accordingly, since no
interpretation is required, sec. 301 does not
preempt their liens. In essence, they ask
whether, in light of past case law, the "or" in
Bluffton should have been an "and."/1 See
Bluffton, 186 F.3d at 862 ("[A] claim may be
preempted under the LMRA either because it
depends on interpretation of a CBA or because the
claim is founded on the CBA.") (citations
omitted).

Identical to the employees in this case, the
Bluffton employees conceded that their liens were
founded on the CBA. See 186 F.3d at 862-63 n.5.
They also argued that since their state claims
did not require interpretation of the CBA, their
liens were not preempted. See id. at 862. We,
however, reasoned that since the claims were
"founded on the CBA," it was "not necessary for
us to determine the extent to which the claims
require[d] an analysis of the CBA’s terms." Id.
at 862-63 n.5 (emphasis added).
 The Bluffton employees relied on the "passage
in Lingle that states that ’an application of
state law is preempted by sec. 301 . . . only if
such application requires the interpretation of
a [CBA].’" 186 F.3d at 862 (emphasis added). The
employees in this case rely on the same passage
to argue that preemption should apply only when
an interpretation is necessary. The employees’
strategy seems to be to seek reversal of the
founded on language in Bluffton, and wedge this
case into the interpretation prong, in hopes of
salvaging their liens. We do not agree that the
preemption inquiry should be reduced to the
interpretation prong. We reemphasize:

We cannot accept the employees’ submission that
the sole test for preemption is whether the
claims require analysis of the CBA’s terms.
Lingle was not a case in which the CBA formed the
basis for the claim. Therefore, the Court did not
need to emphasize that claims founded on a CBA
are preempted. The Court understandably examined
only whether the claim in that case, retaliatory
discharge for filing a worker’s compensation
claim, required an examination of the CBA.

Bluffton, 186 F.3d at 862. Therefore, we read the
"or" in Bluffton as an "or."

Moreover, we disagree with employees’
interpretation of our prior cases. In Atchley,
the employer delinquently paid wage increases
required by the CBA. See 101 F.3d at 497. An
Indiana wage payment statute created a penalty
for failure to pay wages within 10 days of when
due. See id. at 497-98. We examined whether the
statutory claim depended on an interpretation of
the CBA, and found the claims preempted because
resolution was "substantially dependent on
analysis of the CBA." Id. at 500. The analysis in
Atchley centered on the interpretation prong
because the statute created an independent state
right, penal and nonnegotiable in nature, and did
not involve a right founded directly on the CBA.
As in Lingle, the Atchley court had no reason to
discuss the "founded on" prong. And, as we
explained in Bluffton, the fact that it did not
discuss the "founded on" prong does not mean that
the "sole test" for preemption is the
interpretation prong. See 186 F.3d at 862.

In National Metalcrafters, employees brought
suit under the Illinois Wage Payment and
Collection Act to force their employer to pay
vacation benefits owed under the CBA. See 784
F.2d at 820. We found the claims preempted
because resolution of the state cause of action
required interpretation of the CBA. See id. at
824. The statute created an independent state
cause of action to recover entitlements due under
the CBA, and we found that interpretation of the
CBA was necessary to resolution. Further, it
should be noted that, while still valid law,
National Metalcrafters was decided before
Caterpillar and Lingle clarified the categories
we rely on here. Atchley and National
Metalcrafters are inapplicable because they
involved causes of action created by state law
and required interpretation of the CBAs. This
case does not involve an independent state cause
of action.

The employees ask that, if we decline to
overrule Bluffton (as we do), we carve a
distinction based on the facts. Again, they argue
that the validity of the liens is not at issue
because the amount owing has been stipulated by
all parties, and thus, no interpretation of the
CBA is necessary, so the question remaining is
merely one of priority under Indiana property
law. We disagree. This case is factually the same
as Bluffton. The sole difference is in Bluffton
the employees argued that only a "brief analysis"
of the CBA was needed, instead of none, as the
employees here postulate. See 186 F.3d at 862
n.5. Despite this semantic variation, there is no
indication in Bluffton that the amount owing was
in dispute. And, whether the amount was disputed
was not determinative. Certainly, the Bluffton
employees’ liens listed the amounts they were
owed under the CBA. This case, like Bluffton, is
actually a contractual action by employees to
enforce the CBA breached by Bentz. This is a
federal claim "dressed in state-law clothing."
Atchley, 101 F.3d at 500. Section 301 "creates a
federal remedy for the breach of a [CBA]. The
remedy is exclusive; no action to enforce such an
agreement may be based on state law." National
Metalcrafters, 784 F.2d at 823 (citations
omitted).

The employees misconstrue the nature of
mechanic’s liens./2 The Indiana mechanic’s lien
statute does not create an independent
substantive cause of action for vacation pay;
rather, it provides a state statutory remedy
against an employer who breaches a contractual
obligation to pay earned monies. The statute’s
utility to the employees is directly dependent on
underlying contractual rights created by the CBA.
While the parties do not dispute that the
employees are owed $12,700.38, we reckon that
drawing a distinction with Bluffton on this basis
would be unsound. It would encourage employers to
avoid liability by simply disputing the amount
owed. Cf. Antol v. Esposto, 100 F.3d 1111, 1123
(3d Cir. 1997) (Mansmann, J., dissenting).

Here, as in Bluffton, "plaintiffs are attempting
to enforce their rights under the CBA with a
state remedy that would give their liens priority
in a bankruptcy proceeding. Because the claims
are founded on the CBA, they are preempted
whether or not they require analysis of the CBA’s
terms." 186 F.3d at 862.

CONCLUSION

We hold that the employees’ state mechanic’s
liens are preempted by sec. 301 of the LMRA. The
district court’s order is AFFIRMED.

/1 Or, as employees’ counsel asked the Bankruptcy
Court, "whether there would be preemption under
Section 301 of the [LMRA] if a claim is simply
grounded in a [CBA] or if it then--or if it also
requires not only grounding, but an
interpretation." Summ. J. Hr’g Tr., Sept. 27,
1999, at 3.

/2 This is not a case in which plaintiffs are trying
to enforce the arbitration decision, and the CBA
need only be consulted to calculate damages. The
employees have not exhausted their contractual
remedies under the CBA, namely arbitration.

EVANS, Circuit Judge, dissenting. Stare decisis,
as Judge Bauer appropriately notes, is extremely
important, and Bluffton Casting is squarely on
point. But in my view, Bluffton Casting, born
just 15 months ago, is clearly wrong. So this is
one of those rare situations where stare decisis
should not carry the day. Instead, we should cut
our losses and reject Bluffton Casting before it
grows older.

As I see it, Bluffton Casting is inconsistent
with Atchley, National Metalcrafters, Livadas,
and Lingle. The result is that unionized workers
(who have a CBA) lose out in a situation like
this, whereas nonunionized workers (with no CBA)
can file a state mechanic’s lien and jump to the
front of the creditors’ queue. The purpose of
federal preemption is to ensure the uniform
interpretation of CBAs, but that purpose isn’t
served when no interpretation of a CBA is
required. In this situation, I don’t see how an
Indiana law that preferences unpaid workers over
an unpaid bank interferes with consistent federal
law governing labor agreements between employers
and unions.